The trial stage of the central bank of Israel’s CBDC project is being launched on Ethereum’s public blockchain network
The Israeli Central Bank reportedly launched a digital currency pilot program based on the Ethereum blockchain. However, the project might face some significant challenges.
Israel Aiming at CBDC
Many countries, including China, Japan, France, and Sweden have spent years crafting their own digital form of currency.
The report to Globes, The Bank of Israel has joined the trend and is at the initial stages of issuing a CBDC, they have chosen to use Ethereum as their network. Yoav Soffer – CBDC Project Manager at the Bank of Israel – explained why:
“We did a trial with Ethereum technology, not because we think that that’s necessarily the technology we’ll use, but because it was a technology that was available for us to get our hands dirty with, in order to understand its advantages and disadvantages.”
The Bank of Israel created a trial environment based on the Ethereum blockchain and issued a token representing CBDCs It’s also designed digital wallets for people to exchange money with one another within the company.
It is worth mentioning that Australia, Hong Kong, and Thailand all used the same methodology when it comes to their respective CBDC projects. Israel may have been influenced by this as well as the legal, economic, and technological aspects were examined.
Making this initiative a viable option is a challenge. However, it is difficult to give an accurate completion date due to the high complexity involved.
The use of digital payment methods during the COVID-19 pandemic point to different habits of society. Surprisingly, it’s not so unusual for people to use digital tools today. But there are hurdles awaiting CBDC issuances, such as bank interoperability and security.
The Bank of Israel isn’t sure if it can build a digital currency that can fulfill all the needs of the local population. Also, making sure that the infrastructure is stable will take some time which would make this project require an extended timeline.
One example is a bank in Israel that needs a solution, so people can still complete transactions even offline.
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We believe that the central bank should also develop a CBDC that will be accessible and competitive compared to other types of payment. Otherwise, Israelis could simply pay with other traditional methods.
It’s quite unavoidable that many people still use cash so the next challenge is how to make them switch to digital payments. For better or worse, the digital shekel would be closely monitored by the government. Conversely, employing an anonymous shekel is not.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.